I. Sector Background and Structure:
The IT related activities and service companies started in West Bank and Gaza in early to mid 1980s. At that time, there were a handful of companies responding to mainly the demand of selling computers and electronics. At the beginning of the 1990s, a notable sum of serious IT activities and private companies were present in the area. The demand for IT services arose from the private sector, universities and the local governments. Hardware companies were just sub-agents to the Israeli dealers with limited experience in services. The handful of software companies focused on accounting related packages to serve the local market.
Due to the Israeli occupation controlling the telecommunication sector and banning the services of leased lined, fax, satellite links, telephone (20 year waiting line), etc., it wasn't until the Oslo agreement time that the real spread of IT activities started to take place.
The first Palestinian ISP was established and Internet became commercially accessible to individuals, companies and universities. And responding to the establishment of the Palestinian National Authority (the largest IT client in the 1990s) and to the coming of many NGOs, banks and establishment of new companies, the IT sector started to shape and materialize after the 1995.
By 1997, the Palestinian telecom sector was 100% privatized with the establishment of PALTEL, the Palestine Telecommunications Company. With its complete digital network connecting West Bank & Gaza, Paltel offers a wide range of services that the private sector benefit from, like normal fixed telephone line, Leased lines, ISDN connection and much more.

Types of companies
Almost all types of IT companies exist like Hardware (Direct agents or PC assemblers), Software development, consultancy, Internet services, office automation equipment, etc.
Many International companies have already opened direct office or established direct R&D operations in Palestine. Some of which are IDS, Timex and Seimens.

Geographical Distribution
As a response to that most of the IT demand is in Ramallah, Jerusalem and Gaza areas, most of the IT companies are located in these areas, with a more presence in Ramallah.

II. Trade and Investment Patterns:

Imports
All of hardware companies import either directly or through the Israeli agents. After the establishment of the PNA, it was that target of most companies to become independent resellers and distributors for the brand name they carry. Many of the Palestinian companies have such status these days (e.g. VARs, VADs, etc.). Some companies cover regional markets under their profile with the mother company.

Exports
Exports in Palestinian IT sector are very much limited to Software. Some software companies already have outsourcing and developing projects for regional and international companies. Some companies depend solely on their international clients. The current focus of the software companies is shifting towards software exports and outsourcing, especially after the current Intifada. Multiple trade missions and exhibition have taken place to serve this purpose.

IV. Sector Statistics:

• Number of Firms: 80 IT companies and more than 150 small computer stores
• Number of Workers: 1,000 (Paltel, the telecom carrier, employs over 1,500)
• Capital Investment: USD 3,000,000 (year 2001)
• Total Sales: USD 120,000,000 (year 2000)
• Average annual growth rate: % 25-30 (until 2000)

VI. Policy and Regulatory Issues:
There are many laws & regulations that are directly linked to the IT in Palestine like The Telecom Law, The Investment Promotion Law and the IPR Law (under revision). The private sector and through its representing organizations strives to benefit for these laws & regulations and -in parallel- strives to modify them to its best interest.
It's worth mentioning that the investment promotion terms are very competitive in Palestine. As an example, a new company van benefit from a 0% income tax for 3-13 years depending on the investment. The regular Corporate Tax Rate is 20% flat.
The key policy issues are the Internet dissemination, the telecom monopoly, the high-tech parks, the university curriculum upgrade, the telecom regulation, the ".ps" ccTLD.

VII. Trade Organization:
The private IT sector is represented through PITA, The Palestinian IT Association of Companies. Established in Ramallah in 1999 as a membership-based non-governmental and non-for-profit organization, PITA seeks to serve its members and grow the IT sector in Palestine thorough quality services and positive partnership with the government.
 

PITA website is http://www.pita-palestine.org

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